The ethical issues that exist in organizations

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The all objective is totally based how to make good relation with employees in the organization and how to make good environment within the organization as well as in the society. It also helps to given right direction to employees goes in same direction and not moves individually. And in this topic we cover all these importance , scope and articles which help to completing the objectives of ethical issues in organization.


Ethical issue in organization is not an act but a habit. Just as good health requires cultivating the habits of getting enough sleep and eating wholesome food, Aristotle believed that right action was the result of developing good moral habits. In a business context, this means training at the deepest level, something called as ´corporate culture.

Every business organization has its own accountability towards its stakeholders, employees, capital investors, consumers, government, competitors, suppliers, and other community members and also the environment. The organizations have to balance its obligations towards these varied stakeholders to run the firm smoothly. There are various factors that contribute to business ethics. In order to ensure ethical business practices of an organization, it is important to ensure ethical orientation of the people who own, manage, and work for it.

Whenever we act, our actions are evaluated; whether we are doing a right kind of action or wrong. In our family, educational institutions, business organizations and in the society (taking all in to consideration) we follow certain rule and regulations which guide our actions. Those rules, regulation and principles are popularly called as ´ethics.

Many people tend to equate ethics with their feelings. But being ethical is clearly not a matter of following ones feelings. A person following his or her feelings may recoil from doing what is right. In fact, feelings frequently deviate from what is ethical.

One shouldn't identify ethics with religion. Most religions advocate high ethical standards. Yet if ethics were confined to religion, then ethics would apply only to religious people. But ethics applies as much to the behavior of the atheist as to that of the saint. Religion can set high ethical standards and can provide intense motivation for ethical behavior. Ethics, however, cannot be confined to religion nor is it the same as religion.

Being Ethical is also not the same as following the law. The law often incorporates ethical standards to which most citizens subscribe. But laws, like feelings, can deviate from what is ethical.

Finally, being ethical is not the same as doing ´whatever society accepts. In any society, most people accept standards that are, in fact, ethical. But standards of behavior in society can deviate from what is ethical. An entire society can become ethically corrupt.

Then what ethical stands for?

Human being is a social animal. Though rules of nature control humans as they control other living beings, man himself has derived certain principles to govern his own individual and group behavior. These rules, in the form of behavioral standards may differ across cultures and times, but their basic objectives are always mutual existence and peace within the particular community or the social group. By ensuring security and protection of the group these standards helps in the survival of the particular community or a social group and thus its members. These standards of behaviour are called ´ethics.

The word ethical is derived from ´ethos, which means character. In literature ethics means a set of principles or morals. Ethics does not concern with knowledge or science, nor does it concern aesthetic judgment, it concerns with action. Hence, ethics can be defined as the set of principles, or values that govern our actions. These principles consist of a number of components: education, religion, ideology, instincts. Based on all these components, ethics ultimately rests upon the arbitrary choice of what we subjectively feel is right or wrong.

Ethical issue are contemporary standards of principles or conducts that govern the actions and behavior of individuals within the society. They provide a basis for determining what is right or wrong in terms of a given situation. Ethics is a set of moral principles or values which is concerned with the righteousness or wrongness of human behavior and which guides your conduct in relation to others. Ethics also means the continuous effort of studying our own moral beliefs and our moral conduct, and striving to ensure that we, and the institutions we help to shape, live up to standards that are reasonable and solidly-based.


Ethical issue in organization is specialized study of moral right and wrong. It concentrates on moral standards as they apply particularly to business policies, institutions, and behavior. It is a study of moral standards and how these apply to the social systems and organizations through which modern societies produce and distribute goods and services and to the behaviors of the people who work within these organizations. It not only includes the analysis of moral norms and values but also attempts to apply the conclusion of this analysis to that assortment of institutions, organizations, activities and pursuits that people call business.

According to R.Wayne Monday, ethical issue in organization is the discipline dealing with what is good and bad, or right and wrong or with moral duty and obligation·.

According to John Donaldson, Ethical issue is the systematic study of moral/ethical matters pertaining to business, industry or related activities, institutions, or practices and beliefs·.

It is now recognized that it is good business to be ethical. An ethical image for a company can build goodwill and loyalty among customers and clients. It protects or improves reputation of the organization by creating an efficient and productive work environment.


The objective of ethical issue is to establish norms, standards and codes.

1. Norms: norms are expectations of proper behavior. Norms are the ways an individual expects all people to act, when faced with a given situation. Business firms aims at developing such norms within its employees like; punctuality, keep the promises etc.

2. Moral standards: Moral standards are standards that deals with matters that we think are of serious consequence, are based on good reasons and not on authority. Moral standards includes the norms we have about the kinds of actions we believe are morally right and wrong as well as the values we place on the kind of objects we believe are morally good and morally bad.

3.Ethical codes: ethical codes are statements of the norms and beliefs of an organization which are generally proposed, discussed and defined by the middle and top level of the management in the firm and then published and distributed to all its members. In order to improve standards of behavior codes are introduced to ensure good conduct.

Ethical issue also helps in organization to evaluating human practices on the basis of moral standards and giving prescriptive advice on how to act morally in a specific kind of situation.

Nature of Ethical issues in organization

Ethical decisions differ with individual perspective of different persons. Each person views the ethical question in terms of his or her own frame of reference. And this frame of reference is the persons own unique value system. Most ethical decisions involve a tradeoff between cost incurred and benefits received. Cost and benefits, profits and social responsibilities are different ends of a single spectrum. All cannot be maximized simultaneously. Business ethics is a specialized study of moral right and wrong. It concentrates on moral standards as they apply to business institutions, organizations and behavior.

Ethical issue can be both normative and descriptive. It is said to be normative because it takes the practical task of arriving at moral standards through advocating good habits a business firm should necessarily acquire, duties it should follow, virtues it should maintain and the overall utility it should maximize. It is sometimes evaluated as descriptive ethics because it outlines ethical belief patterns of various business firms and explains them.

It is meta-ethical, means whether moral terms that are generally used to describe individuals and the actions they perform can also be applied to organizations, corporate business and other collective entities.

SCOPE OF Ethical issue in organization

Ethical issues exist at all levels of organization activity. Business ethics concern the ground rules of individual company and societal behavior. Organizational ethics requires businesses to think about the impact of its decisions on people or stakeholders who are directly or indirectly affected by those decisions.

Business must become aware of the ethical diversity of this world because of increasing globalization of the economy. It must learn the values of other cultures, how to apply them to its decisions, and how to combine them with its own values. In a world where transnational corporations and their affiliates account for two third of the worlds trade in goods, and employ 73 million people, corporations cannot afford to ignore the reality of multicultural ethics.

The scope of business ethics can be applies at five levels. They are as follows:








Employees: The business firm along with profit maximization should also look after its human resources. It·s should provide Better working conditions to its workers, should involve employees in management process, should assure job security and should provide welfare facilities like free insurance, hospital facility etc. being honest in serving consumers, clients, employees, suppliers, distributors and the public.

Customers: Business firms should provide better quality of goods and services at reasonable price to its customers. It should not practice iscriminatory pricing also should not make false claims about products in advertisement.

Shareholders: Business organization should ensure capital appreciation, ensure steady and regular dividend, disclose all relevant information to the shareholders, and Protect minority shareholders interest. It should not window dress balance sheets and should protect interests in time of mergers, amalgamation and takeovers.

d) Banks and other lending institutions: the business organization should provide Guarantees while borrowing funds and should pay interest and repay the loan of the bank.

e) Government: Business organization should obey the rules and regulations formed by the government. It should pay taxes in time and help the government in the development and progress of the country.



The employees should not use office facilities for their personal purpose. The top level or executives or supervisors should not misuse others for personal purpose. They should not indulge in politics to gain power and should not spoil promotional chances to others. They should keep their promises to the customers, or employees. They should help each other in order to achieve their and the firms objective.



It should have concern for poor and downtrodden. It should provide employment facilities to the socially backward people and the people who have been displaced by the organization in order to build their entity. It should contribute to the better quality of life of its employees and customers and the society in total.



The business organization should have air practices relating to requirement, compensation, layoffs, and perks promotion for employees. It should motivate the employees to lead the team which will strengthen their morale and help to achieve better and higher


Ethical issue in organization reflects its responsibility, authority, and dignity. So the business organization wants to conduct its business without affecting the interest of society and the business itself by assuming responsibility exercising authority and maintaining dignity. But there are some factors affecting the observation or adoption of business ethics.

Individual Level

Lack of education: - education refers to the knowledge of ethical values. Businessman wants to follow business ethics strictly. But he doesn't know what business ethics is relating to his business.

Lack of ethical attitude: - a businessman wants to stand out distinctly from their fellow business man. At the same time he doesn't prefer to practice business ethics in spite of his sound knowledge of them.

Personal code of behavior of the individual: - the personal ethics of an individual has an impact on his professional and organizational behavior. The ´manµ in the ´managerµ is more powerful in setting out the directives and boundaries of behavior. The personal value system and concept of morality develops a background for identifying and evaluating the ethically of his business decision. Further, a person's value system and definition moral standards are the result of his own thought process, perception and learning as well as the complex environment which influences his life. The process of cognition which combines the internal meditation and analysis and the external activities of collection and compilation of information clues from the surrounding develop an individual's idea of morality. The up-bringing of the individual also has an effect on this process. This may, induce relativism in moral ideas and the criteria for the ethical decision-making in business setting.

Organizational Level

Abnormal profit motive: the very purpose of starting is to earn profit. Only lesser amount of profit is earned during the initial period of business. But the businessman wants to earn more profits by economizing establishment expenses.

Policies of the company: The company policy has an effect in determining the scope and dimensions of ethical behavior of employees. A policy explicitly encouraging ethical behavior and providing clear-cut guidelines for the same acts as a motivating and directing force for ethical conduct and decisions. The leaders of company management have decisive role in this regard. Thomas Garrett says, in this context, that the best protection is the example presented by the top management and the atmosphere it creates. When the leaders are scrupulous, employees know what is considered right. When example is supported by explicit policy, the followers have a clear idea of how to translate the example of leaders in to action. When policy is enforced and reinforced the employees know that honesty is the best policy in this company.

Non cooperation of workers: workers or employees don't care about the business ethics. They want, just, to do their work as quickly as possible for remuneration. The impact of non-adoption of business ethics affects the business and the workers or employees.

Leadership: A leader plays a crucial role in creating, maintaining and changing ethical culture. Leaders at every level serve as role models and employees have more daily contact with their supervisors. ´A leader is best when people barely know he exists, not so good when people obey and acclaim him and worse when they despise himµ. An honest leader can act as a role-model for his subordinates. The moral standards of the leader and his sensitivity towards moral issues influence the decisions and actions of his subordinates. For instance, if the leader condones unethical practices like padding the expense account, accepting expensive gifts from outsiders, eventually overriding the rule and norms for personal favors, etc., the subordinates assumes such activities as acceptable practices. Their boss has an impact on their ethical behavior, because he is the first dictator of ethics in their work- behavior.

Business strategy: - Business strategy is the managerial plan for detecting and running a particular business unit. Such strategy defines the product market posture of its individual business units. Business strategy deals specifically with the issues of:

How the organization intends to specifically with specific business

What the role/thrust of each key functional area will be in

contributing to the success of the business in the market place.

How resources will be allocated within the business unit.

Unhealthy competi ton: business man adopts unfair trade practices to have edges over other competitors. This will ruin business in long run. Unhealthy competition is not preferred by gentleman businessman.

Corporate culture: The corporate response to public demand for ethical behavior and concern for the appearance of propriety· is the corporate reputation. The firms engage in ethical behavior may be due to profit motives. An ethical decision does not always lead to the highest profit possible. Perhaps the firm engages in ethical decision making because it is the right thing to do·. Engaging in ethical behavior, implementing ethical programs or instituting codes of conduct all contribute both to the internal culture of the firm as well as to the external stakeholders perception of the firm.

3. Social and political level

Political interference: political parties approach the business man to get donation. Now, the business man is not ready to deny it as it would affect the smooth running of business. Donation given to a political party considered unnecessary expenses from the business point of view. This will affect profit and smooth running of business.

Political uncertainty: the policy of government affects the business ethics to some extent. If a number of governments are in power for short periods, there is every chance for changes in the policies of govt. stable government alone does not affect business ethics.

Ethical climate of a country: the general environment in the country and the insistence of the society on moral conduct and character has a wide and deep influence on business ethics. Business is a part and parcel of the society and business ethics is a part of general ethics, value-system, morality and culture of the society. The moral standards in business are the reflection of the moral standards of the society. If the society in general looks to bribes, lies, violations of promises and such other acts liberally and condone them from time to time, the business men cannot be expected to remain aloof from indulging into such unethical practices for personal benefits. In order to foster ethics in business, we have to strengthen ethics in personal as well as social life.

Corruption: a business is regulated by the government through its officials. Straight forward and able officials are working in the government pts.However, the approach or behavior of some government officials is not appreciated by the business men.

Social pressure: social forces and pressures have considerable influence on ethics in business. Society, in the recent past has demonstrated how a special status can be conferred on back ward caste boycotted products and complained and threatened action to prevent the construction of nuclear power plants. Such actions by different groups in society may, infect, force management to alter certain decisions by taking a broader view of the environment and the society.

Red-tapism: the existence of red tapes also affects the business ethics. Business units should get prior permission of the government t for all its proceeding at every stages of development. Red tapism is found to be at its maximum in the issue of license and in the taxation policy.


In the increasingly conscience-focused marketplaces of the 21st century, the demand for more ethical issue processes and actions is increasing. Simultaneously, pressure is applied on industry to improve business ethics through new public initiatives and laws. The business organizations should maintain an ethical code of conduct and communicate those to all its stakeholders and apply these in various levels in order to survive in the society